Blaine Kitchenware Case Study

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Blaine Kitchenware Case CURRENT (2006) FINANCIAL POSITION Liquidity Current Ratio 4.44 Profitability Return on Equity 0.11 Return on Assets 0.09 Asset Utilization Asset Turnover 0.58 Growth Revenue Growth 8.31% Net Income Growth 0.50% Leverage Debt/Equity 0.21 ESTIMATED IMPACT OF STOCK REPURCHASE Direct Impacts (in Mill.) Current Assets -209 Liabilities 50 Equity -259 Resulting Figures Current Assets 130.678 Total Assets 383.253 Liabilities 153.89 Equity 229.363 Estimated Ratios Current Ratio 0.001706402 Return on Equity 0.234995687 Asset Turnover 0.967235473 1) The company is clearly in a strong financial position, highly liquid with a current ratio of more than four and with an abundant cash reserve. At the same time, the extreme liquidity of the company that can be seen as an operational strength/stabilizing factor, to some degree, also contributes to significant drains on profitability ratios and to the efficiency of asset utilization, as measured by the asset turnover ratio. Even counting the totality of the company's liabilities as debt, the debt/equity ratio would only be the third highest amongst competitors and not at all dangerous to the company; as it is, the debt level is negative to a substantial degree. On a relative and absolute basis, the company is highly underleveraged. 2) Clearly, a major repurchase of stock using cash assets and some additional borrowing changes things dramatically. Asset turnover almost

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